The GfK consumer confidence survey failed to meet expectations in April as the index slipped lower for the first time in seven months, and households may turn increasingly pessimistic towards the economy as they face a weakening labor market paired with tightening credit conditions. The confidence index slipped to 2.4 from a revised reading of 2.5 in March, while the gauge for economic expectations fell to -32.8 from -27.9 in the previous month, and the data foreshadows a weakening outlook for private-consumption as the region faces a deepening recession. Meanwhile, after lowering the benchmark interest rate by 25bp to 1.25% in March, ECB President Trichet signaled that borrowing costs could fall lower as growth and inflation falter however, as the central bank head remains reluctant to overshoot the interest rate, policymakers may place a floor on rates and adopt unconventional measures to manage policy going forward.

Bullish Scenario:

If we see substantially deeper available liquidity on the Bid side of the market, this tells us that major price providers in the market are looking to buy the Euro against the US Dollar. Considering that close to 60% of all FX market volume is cleared through just six top banks, we see it prudent to be on the same side of the trade as major institutions and will favor a bullish bias on EURUSD ahead of the data release.

Bearish Scenario:

If we see substantially deeper available liquidity on the Offer side of the market, this tells us that major price providers in the market are looking to sell the Euro against the US Dollar. Considering that close to 60% of all FX market volume is cleared through just six top banks, we see it prudent to be on the same side of the trade as major institutions and will favor a bearish bias on EURUSD ahead of the data release.